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Audi Opts for New Plant in Mexico

Anticipates cost of less than $2 billion.

by on Apr.19, 2012

Audi Chairman Rupert Stadler introduces one of the maker's new models.

After years of debate, luxury maker Audi has finally won approval from parent Volkswagen AG to build a new North American assembly plant that could help fuel its record growth in the U.S. and other markets.

But the maker of products like the A6 and Q7 has decided to locate the facility in Mexico, rather than the United States, it has announced.

“As an established carmaking location, Mexico offers an excellent economic basis for Audi production operations,” said Audi Chairman Rupert Stadler. “Mexico is one of the world’s top ten automotive locations and offers a blend of tradition and experience.”

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Mexico now has significantly more production capacity than its own market needs might justify, industry analyst note, and continues to gain more rapidly.  Nissan recently announced a multi-billion-dollar project near Aguas Calientes, with alliance partner Mercedes-Benz considering a nearby site. And Honda earlier this month broke ground on a new plant in the country that will produce the subcompact Fit, among other models.

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Audi May Get Go for New North American Plant Tomorrow

But maker reportedly leaning toward Mexico v US.

by on Apr.17, 2012

Audi CEO Rupert Stadler, shown here with the etron concept, reportedly wants the new plant in Mexico.

The long-delayed decision on whether to build an Audi plant on this side of the Atlantic could be resolved as early as tomorrow, insiders suggesting that parent Volkswagen Group will formally give its approval on Wednesday.

But other reports caution that the new factory is more likely to go into Mexico than the U.S. Mexico has become a hot spot for global automotive manufacturers looking to take advantage of its central location, low manufacturing costs – and the extensive array of automotive free trade agreements Mexico has lined up with countries around the world.

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The parent VW Group is apparently supporting the idea of building the new plant in the States, according to Germany’s Automobilewoche magazine.  But Audi CEO Rupert Stadler has been lobbying for a site in Mexico.

VW recently opened a new factory in Chattanooga, Tennessee and has seen a sharp surge in demand for the Passat model produced there.  That has led to a rapid expansion of capacity in Chattanooga.  VW may prefer to take advantage of the supply and distribution network set up to support that factory.  And it might see an advantage to placing a plant in the U.S. as a way to help spur demand in one of its weaker markets.

While Audi has been setting sales records in the United States, it still lags sharply behind key competitors BMW, Mercedes-Benz and Lexus, even though the VW brand is now one of the top sellers in the global luxury market.

The “Made in USA” label could prove important in boosting sales, Michael Macht, the VW Group’s manufacturing chief, told Automotive News earlier this year.

But there are plenty of reasons why Audi CEO Stadler appears to be favoring Mexico, sources stress.  Indeed, VW has long favored the Spanish-speaking nation where it has been building such models as the Beetle.

The typical Mexican automotive assembly plant’s total labor costs run about $8 an hour, according to industry data.  Quality has proven extremely high.  There is an extensive supplier network and reasonably good distribution system for completed vehicles.

Among other things, Audi might be able to directly tap a new powertrain plant in Silao, Mexico, which will launch production next year and offer capacity of up to 300,000 engines annually.

Meanwhile, Mexico has signed more automotive free trade agreements than any other country except Israel, meaning minimal duties on products exported from the country.  That could be seen as particularly useful to supply Audi’s growing sales in not only the U.S. but emerging markets, like Brazil, Chile and Argentina, in South America.

Audi isn’t the only high-line maker weighing its Mexican options.  Mercedes-Benz recently announced that it will build a second North American plant to supplement the existing facility in Alabama.  While officials only say they are considering several options, insiders have told TheDetroitBureau.com that the German maker is leaning heavily towards a site in Aguas Calientes.

That would put it adjacent to, and perhaps even on the actual campus of, a new Nissan plant announced earlier this year.  Mercedes’ parent, Daimler AG, has been rapidly expanding its partnership with the Euro-Asian Renault-Nissan Alliance. Among other things, that includes providing the MFA small car platform that will be used for a production version of the Infiniti Etherea concept vehicle.

The Daimler plant, if it goes to Aguas Calientes, may produce vehicles for both Mercedes and Nissan.

As for Volkswagen, both the Chattanooga plant and the Audi facility would become critical pieces in the maker’s plan to achieve global dominance by 2018, when its various brands aim to collectively sell at least 10 million vehicles annually.

Audi Wants U.S. Plant – So Please Buy More Cars

Target date: 2015?

by on Mar.09, 2011

Audi America President Johan de Nysschen wants to open a plant in the States - finally.

It wouldn’t take much to get Audi to build a new plant in the U.S., says the maker’s U.S. chief executive, just better sales.

After years of debating whether it needs to put a plant in North America, the Volkswagen subsidiary has finally concluded it’s a good idea, especially considering the impact the strong Euro is having on products imported from across the Atlantic.

But the key to moving ahead on an investment that would likely top $500 million will be to boost sales to a level that can justify a U.S. assembly plant, says Audi of America President Johan de Nysschen.

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“We think we’ll be able to reach volumes that facilitate a confident decision about U.S. manufacturing before the year 2015,” the executive explains.

Audi’s confidence reflects its improving fortunes after years struggling to push out of the second tier of luxury brands.  While it now rings up global sales close to those of rivals BMW and Mercedes-Benz, it only broke the 100,000 mark in the key U.S. market last year.  That’s less than half the volume of American luxury leader Lexus.

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Audi Soon to Decide on U.S. Assembly Plant

May be essential for Audi's goal of doubling sales.

by on Jan.14, 2011

Audi will decide whether to build a U.S. assembly plant by year's end, says Jonathan Browning.

Audi is giving serious consideration to adding its own production plant in the United States as part of the Volkswagen subsidiary’s plan to double sales to 200,000 by 2018.

While the German marque has become one of the world’s largest luxury brands – in some markets now leading more established rivals like Mercedes-Benz and BMW – it has continued to lag in the U.S., where it never fully recovered from a safety scandal back in the late 1980s, despite having been cleared by federal regulators.

Jonathan Browning, the new CEO of the Volkswagen Group, the U.S. subsidiary of Volkswagen AG overseeing both the VW and Audi brands, says a decision on the American assembly plant will be made by the end of 2011.

That would finally wrap up an ongoing debate that has spanned more than a decade.  While both Benz and BMW now have major assembly operations in the U.S., Audi has resisted setting up a “transplant” assembly line, in part, because of the limited sales volumes it has achieved in the States.  But critics have argued that the maker is suffering from a chicken-and-egg syndrome and can’t build volume without the plant.

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Playing in favor of setting up a facility, lopsided dollar/Euro exchange rates have made it increasingly cost-prohibitive to import vehicles from Europe, especially smaller models like the popular A4.

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